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‘Initial Witness Offerings’ and ADAPT: Fixing the ICO Method

A Medium post by software engineer and co-founder of CoinFund, Aleksandr Bulkin, from May 12 invites discussion for his solution to an underdeveloped point in cryptocurrency; regulation in the ICO market.

Initial Coin Offerings (ICO’s) was a concept of decentralized crowdfunding that entered cryptocurrency mainstream with the introduction of Ethereum.

Since then it has become a toss-up, with some projects meaning well and others resulting in a race of dumping the tokens on an exchange as soon as the ICO is over.

The entire ICO scene, regardless of the legitimacy of the project, was a regulatory war zone.

This was mostly ignored for a little while, but as regulations closed their grip things began to change in the way ICO’s proceeded.

KYC procedures were implemented, to try and appease requirements from stricter governments. As hassle increased, citizens of certain countries were banned from participating. Most frequently banned are the United States and South Korea. Not surprisingly, these countries regulations regarding cryptocurrency are also some of the most ambiguous and unfriendly.

From ICO to IWO

Bulkin suggests a new model called IWO, short for Initial Witness Offering. The model aims to satisfy regulatory concerns while still allowing innovation to flourish.

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Companies seeking investment capital would obtain it from future witnesses, rather than venture capitalists, which would prevent companies from being controlled by profit-seeking stockholders. The article defines witnesses as “self-interested parties who will perform the service as long as it pays.”

Masternode owners, miners, appointed delegates, would all be examples of witnesses. They are all essential to the network but are motivated financially. All have significant skin in the game, so they benefit when the network benefits. Thus, companies would have no problem finding paying users to be witnesses, with no misalignment of values.

How are IWOs Envisioned to Work?

Bulkin explains that ‘witness badges’ could be used in a similar way to tokens, but without worrying about being classified as securities. A decentralized network would require these badges for participation and since they are non-transferable, “the only way to benefit from owning them is by becoming a witness. In fact, the network may simply burn badges that are not utilized as witnesses within a given period of time.”

An airdrop of the currency would then be performed to incentivize early users and reward witnesses, and after some time, the ‘witness badges’ expire. Around this point, anyone can stake on the network to become a witness, helping to further the decentralization of a project.

Bulkin goes on to discuss a practical way of achieving this. He is currently designing a toolkit called ADAPT – “a meta-layer for decentralized programming,” which “delivers a programming model that enables building a variety of economic models easily.”

Users can read ADAPT’s whitepaper here. The whitepaper goes into detail about the toolkit and has information about partnerships and how they plan to raise funds as well.